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Improving User Experience and Retention with the Activation Funnel

Failure to retain users, or churn, is a major problem plaguing consumer software applications. The average application loses the majority of users who download it within one day, and many of these users abandon the app even before experiencing the value that the app offers.

cell phone

To combat early churn, many product managers measure and optimize their activation rate.

The Activation Funnel

Activation rate, in a nutshell, is the percentage of users who stick with your app long enough to experience the value it offers. Take these examples:

  • A dating app might consider a user to be activated once he or she gets their first “match.”
  • A ride share app might consider a user to be activated once that user takes their first ride.
  • A note-taking app might consider a user to be activated when that user saves his or her first page of notes.

When choosing your activation event, it’s important to ask yourself why someone began using your product. What do they hope to achieve?

After choosing an activation event, the product manager can identify the path to activation to test and optimize its steps. Take our hypothetical ride share app from above; the steps of the activation funnel are as follows:

  1. Create an account
  2. Link a payment source to account
  3. Request and complete a ride

At this point, the user has experienced the value of the app (getting a ride) and is less likely to churn.

The activation funnel might look like this:

We can see that for every download, there is a 90% chance the user will create an account (while 10% will churn at this stage), and so on. It’s normal to expect some churn at each stage of the funnel, but we can see that linking a payment source- with 61% completion- is a major detriment to providing value and getting users activated.

How to Improve Activation

  1. Know the why behind the numbers

Knowing 61% of users link a payment source is half the battle. The real challenge is observing and talking with users to elicit feedback and understand the disconnect. Perhaps users doubt the app’s credibility or maybe they can’t figure out how to link their payment source. It’s important to not make assumptions at this point.

man woman interview

This was famously exemplified by the founders of Airbnb. After observing poor bookings despite an abundance of property listings and website traffic, the founders took a trip to New York to conduct elicitation interviews with their users. These interviews indicated that poor presentation of homes was to blame, as the hosts were using cellphone cameras that produced “Craigslist quality photos” of their properties. After hiring professional photographers to take high-quality photos of listings, bookings on the site increased dramatically.

  1. Test only one step at a time

This may sound obvious, but some developers may be tempted to test multiple steps at once. The problem here is that changes in one stage may cause ripple effects down the funnel.

test post it notes

Say we decide to offer bitcoin as a payment option for our rideshare app and the percentage of users who link a payment source jumps from 61% to 65%. The additional 4% of users (who we will call “group x”) are willing to link a bitcoin wallet but were unwilling to link a credit card or bank account. Introducing group x at this point in the funnel- where they did not exist previously- has the potential to alter the results at subsequent steps because these users think and act differently than the users we were previously observing. Therefore, the percentage of users who take a ride (the final step) may be affected by the introduction of group x, which would compromise the results of any concurrent testing.

  1. Remove all unnecessary steps

Each required action causes friction in the activation funnel and decreases the likelihood that a user will reach the activation event, therefore extra steps should be avoided. For example, when prompting users to create an account, require them to fill out only the fields that are absolutely necessary to get started, and collect additional information after the user experiences how great your app is.

A great example of this is the language-learning platform Duolingo. Duolingo allows users to complete language lessons before creating an account, clearing the path to value and saving low-value tasks for later. By doing so, Duolingo allows users to experience its value instantly which improves usability and enhances the user experience.

While there are several methods to increase user retention, keeping an eye on the activation funnel is a great place to start. Although requirements should have been gathered before development began, monitoring the steps of the activation funnel can help you refine your functional and non-functional requirements to better meet the needs of your users.

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